Microfinance in Afghanistan

Afghanistan Rural Microcredit Programme The First MicroFinanceBank – Afghanistan AKAM worldwide Microfinance Home
Loans have allowed some farmers to repurchase land sold during civil strife to poppy farming landlords and warlords, replant the fields with wheat and potatoes and acquire livestock

Afghanistan Rural Microcredit Programme

Following the collapse of the Taliban regime in Afghanistan, AKDN established the Emergency Microcredit Programme and the Rural Microcredit Programme, each of which was aimed at improving the economic security of the population and offering credit for start-ups, re-starts and the expansion of income-generating activities.

In March 2004, the Rural Programme was institutionalized into the Afghanistan Rural Microcredit Programme (ARMP), which provides a wide range of credit products to farmers and traders in rural provinces. It has also provided special credit for over-in debted farmers and financing for crop substitution in poppy growing areas. Loans have allowed some farmers to repurchase land sold during civil strife to poppy farming landlords and warlords, replant the fields with wheat and potatoes and acquire livestock.

At June 2006, ARMP was active in 39 districts and 9 provinces. In these areas, over 40,800 clients were served with loans totalling over US$ 29 million. This represents approximately one-third of the overall microfinance provision in the country. The institution’s efforts in building appropriate and accessible financial services in rural areas greatly complement AKDN’s activities in rebuilding the asset base of rural households and revitalising markets and the rural economy. In particular, AKDN has closely linked its business development services and vocational training programmes with ARMP’s credit options.

The First MicroFinanceBank – Afghanistan

In 2004, the urban portion of the Emergency Microcredit Programme in Kabul, which was established immediately after the Taliban regime collapsed, was converted into The First MicroFinanceBank in Afghanistan. With a paid-up capital of US$ 6 million invested by the Aga Khan Fund for Economic Development (AKFED) and the International Finance Corporation (IFC) and, at a later stage by Kreditanstalt für Wiederaufbau (KfW), the institution was the first of its kind under the country’s new regulatory structure and was granted license #001 under the new banking law in the autumn of 2003. In 2005, the remaining urban portions of the Emergency Microfinance Programme in Pul-i-Khumri and the Urban Microcredit Program in Mazar-e-Sharif were also absorbed into FMFB-A.

The Bank provides credit and saving products as well as domestic and international payment services. It focuses on microenterprises, small businesses and the creation of productive sources of income and employment.

Beginning in Kabul and urban centres in the northeast of the country, the Bank will gradually expand to urban and rural areas of Afghanistan, with a view to opening 14 branches in the next three years. Its main goals are sustainability, broad geographical and service outreach and maximal impact.

From inception to June 2006, FMFB-A has provided over 18,000 borrowers with US$ 27 million in loans.

The establishment of the Bank is an integral part of the AKDN’s long-term commitment to contribute to the reconstruction and rehabilitation of the economic infrastructure and civil society institutions in Afghanistan.

AKAM worldwide

AKAM’s microfinance initiatives range from village lending cooperatives to self-standing microfinance institutions to full-fledged microfinance banks. These activities currently operate in Afghanistan, Burkina Faso, Egypt, India, Kazakhstan, Kenya, Kyrgyz Republic, Madagascar, Mali, Mozambique, Pakistan, Syria, Tajikistan, Tanzania, and Zanzibar. Often they are part of wider integrated development strategy being implemented by the AKDN within each country. In addition to providing financial services to the poor, they may include business or technical advisory/training extension services and business development programmes that work directly with local entrepreneurs.